Business plans, and why your business needs a strategic plan
Every day I hear of companies in the mining and construction industries with high turnovers, great margins and rapid growth. Most of them started in the family home, and then overnight became a large business with 50 employees, a fleet of motor vehicles and a workshop to maintain them all.
What you don’t hear about these ‘overnight successes’ is the mountain of working capital needed to grow the business so quickly. They’re often financed by using the family home to secure an overdraft or, in some cases, money that should have been set aside to pay the business’ tax obligations.
And that’s not the worst of it. These businesses usually have inadequate policies and procedures in place, causing instability at their very foundations.
As I said, I hear about these companies in the mining and construction industries every day. But the problems certainly aren’t restricted to businesses in those industries. It can happen to pretty much any business that grows too fast, too soon.
Get the foundations right
When building a house, the first step is to get an architect to help you design the plan. Once it’s finished, that plan is used to lay the foundations, construct the frame, and even determine where the power points and light switches will go. And providing you have quality materials and a competent builder, your house should be strong enough to weather any future storms.
And it’s the same with building a business. You start by getting your accountant or advisor to help you design a solid, strategic business plan. Then you use that plan, along with quality products/services and competent staff, to create a business that’s strong enough to make it through the tough times.
A strategic plan for success
One question you should always be able to answer is, “What is your strategic plan for your business?” If you can’t answer it (because you don’t have a plan), then you need to start working on one. Here are some questions that will help get you think strategically:
- What does success mean to you?
- Where do you want to be in one year and three years’ time?
- What do you want your business to look like?
- What will your business management structure look like?
- What’s your exit strategy?
You should be able to answer all of these questions, or at the very least be working out the answers.
The best thing you can do as a business owner is to hope for the best and prepare for the worst. The businesses that performed well throughout the mining cycle had all prepared for the bad times. Most, if not all, had strategic plans in place to diversify if the marketplace slowed down. And they were able to not only respond quickly, but also measure the effect of their decisions quickly.
Keep referring to your business plan
A lot of plans are relegated to the bottom drawer of a filing cabinet as soon as the business is up and running. After all, once the bank’s finance is approved there’s no need to look at it again, right?
Let’s go back to our house analogy. You probably spent hours with the architect making sure your plans were perfect. So how would you feel if the builder went ahead and built your house without referring to them once?
A business plan isn’t something you just ‘set and forget’. You should get together with your trusted advisor regularly and review it—every six months at a minimum, but ideally every month. The business world is changing constantly, and your business needs to adapt to those changes. Referring to your business plan regularly and refining your strategy will ensure your business is always heading in the right direction.
If you’d like some help creating a business plan, or have some questions you’d like answered, don’t hesitate to get in touch with us.
And may your business be standing for many years to come.